Federal Court: Small Business Set-Asides Are “Competitive”

A federal judge has denied a large business’s pre-award bid protest, which was based on the large company’s argument that small business set-asides do not constitute a type of competitive procurement.

Although the decision of the U.S. Court of Federal Claims in Res-Care, Inc. v. The United States, No. 12-251C (2012) involved a specific statute applicable to Job Corps Centers, the court’s affirmation of small business set-asides as “competitive” reinforces an important principle underlying FAR Part 19 and other programs benefiting small government contractors.

The Court’s Res-Care decision involved a Department of Labor small business set-aside solicitation for the operation of the Blue Ridge Job Corps Center in Marion, Virginia.  Res-Care, the incumbent contractor, wished to bid on the procurement, but did not qualify as a small business (perhaps because Res-Care had outgrown the size standard while performing the incumbent contract).

In similar situations, most large contractors seek out small teaming partners or move on to other contracts.  But Res-Care had other ideas.  Res-Care filed a pre-award bid protest with the Court, challenging the small business set-aside designation.

Res-Care’s primary argument was that the Workforce Investment Act calls for the DOL to award Job Corps Center operations contracts “on a competitive basis.”  Res-Care argued, in essence, that small business set-asides are not competitive, and thus cannot be used to procure Job Corps Center operations under the statute.

The Court noted that the Workforce Investment Act does not define “competitive basis.”  However, the Court wrote that the Competition in Contracting Act “defines a similar phrase, ‘competitive procedures,’ to include procurements that are set-aside to promote small businesses.”  The Court found the CICA definition persuasive.

In addition, the Court wrote, “the common usage of the terms ‘competition’ and ‘competitive’ also support” the view that small business set-asides are “competitive.”  The Court explained, “[t]here must be a minimum of two potential bidders before a procurement can be set aside for small businesses.  In the ordinary sense, then, small business set-asides are competitive.”

The Court wrote that in its opinion, the Workforce Investment Act unambiguously allows for small business set-asides.  “Even if the statute were unclear, however,” the Court concluded, the DOL would have properly interpreted the statute as allowing for small business set-asides.  The Court denied Res-Care’s bid protest.

Perhaps the Res-Care decision sounds like no big deal, but just imagine the headlines if the judge had ruled the other way: “Federal Court Says Small Business Set-Asides Are Non-Competitive.”  To use non-legal parlance: yikes.

Fortunately, the Court avoided such an unhappy result and confirmed that small business set-asides are part of the “competitive” procurement arena, meaning that Res-Care will likely be an infrequently-remembered case.  And that’s a good thing.

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